Nonprofit hospitals can be money-making operations

Across the Tampa Bay area, construction on residential and commercial projects has stalled. But cranes are still active on a number of multimillion-dollar projects bankrolled by an unlikely source: nonprofit hospitals.

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The construction boomlet — among the projects are a $200-million hospital for St. Joseph's in Lutz and a $400-million replacement for All Children's in St. Petersburg — highlights a startling reality: Many nonprofit hospitals, originally set up to help the poor, have become moneymaking machines.

Of the 16 nonprofit hospitals in the Tampa Bay area, four lost money in 2006, the latest period for which financial data is available. The money losers are St. Anthony's and Bayfront Medical Center in St. Petersburg, Helen Ellis in Tarpon Springs and University Community Hospital in Tampa.

At the other end of the spectrum, seven hospitals reported net income exceeding $10-million on their Medicare cost reports. The biggest earner was St. Joseph's 822-bed hospital in Tampa, which netted more than $83-million.

Cost savings from consolidation, rising Medicare reimbursements and more aggressive collection policies have led to the healthier balance sheets. Nonprofits, which account for the majority of U.S. hospitals, are faring even better than their for-profit counterparts: 77 percent of the 2,033 U.S. nonprofit hospitals are in the black, while just 61 percent of for-profit hospitals are profitable, according to the American Hospital Directory, a Louisville, Ky., company that gathers data from hospitals' Medicare cost reports.

Times are still tough for some hospitals, particularly those with a high percentage of uninsured patients or a focus on poorly reimbursed services like psychiatric treatment.

Lisa Patterson, a spokeswoman for St. Joseph's, attributed the hospital's strong net income in 2006, the highest in five years, to the size of the facility and the complexity of cases it handles. "The more complex the case, the more we get paid," she said. "But the money doesn't go to any kind of shareholders. We reinvest it in facilities and programs in the community."

St. Joseph's, which includes a women's and children's hospital, is the big-money engine behind the nine-hospital BayCare Health System. Even with a $3.6-million loss at St. Anthony's, BayCare hospitals had total net income of $147.5-million in 2006.

In return for not paying taxes, nonprofit hospitals are supposed to provide a "community benefit," a loosely defined requirement whose most important component is charity care. BayCare hospitals consider uninsured patients with incomes less than 250 percent of federal poverty guidelines to be eligible for charity care. In 2007, BayCare wrote off the cost of about $50-million in services to these patients.

Those kinds of givebacks are coming under increasing scrutiny. In a report in December 2006, the Congressional Budget Office estimated nonprofit hospitals receive $12.6-billion in annual tax exemptions, on top of the $32-billion in federal, state and local subsidies the hospital industry as a whole receives each year.

"Some nonprofit hospitals seem to forget that their operations are subsidized with generous tax breaks. They allow their priorities to get out of whack," he said.

Information from the Wall Street Journal was used in this report. Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.

Biggest net income | St. Joseph's, Tampa, $83.1-millionSecond only to Tampa General Hospital in size, St. Joseph's benefits from strong market share and high percentage of insured patients.Highest patient revenueTampa General, Tampa: $697.3-millionAs the biggest hospital in the Tampa Bay area and the only one offering high-level trauma care and organ transplants, Tampa General topped the charts for revenue. Net income was $45-million.Biggest loser as percent of revenueHelen Ellis, Tarpon Springs: $9-million lossThe small hospital, which is affiliated with the University Community Hospital network, posted its largest loss in five years as operating expenses outstripped revenues.Biggest net loss | University Community (Fletcher Avenue): $11.3-million lossTampa's UCH had operating losses cushioned by $13-million in nonpatient revenue in 2006, but still reported a loss. The hospital reportedly moved into the black in 2007.